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Study Resources (Accounting)

LO4 Exercise 4 On November 1, 20X3, Petrel Corporation, a calendar-year US corporation, invested in a purely speculative contract to purchase 1 million yen on January 30, 20X4, from the Karoke Trading Company, a Japanese brokerage firm. Petrel agreed to purchase 1,000,000 yen from Karoke at a fixed price of $0.0100 per.
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LO1 Exercise 1 On July 1, 2004, Parslow Corporation acquired a 75% interest in Sanderson Corporation for $150,000. Sanderson’s net assets on this date had a book value of $140,000 and a fair value of $160,000. The excess of fair value over book value at acquisition was due to understated plant assets.
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LO2 Exercise 6 Catbird Corporation paid $240,000 on April 1, 2006 for all of the common stock of Bug Corporation in a business acquisition. Bug’s stockholders’ equity at April 1 consisted of the $195,000 January 1, 2006 stockholders’ equity of Bug plus first quarter income less dividends. Dividends are paid quarterly. Any.
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LO3 Exercise 3 On November 1, 20X3, the Penguin Corporation, a US corporation, purchased an extruding machine from Shearwater Corporation, a UK company. The purchase price was $10,000 and Penguin agreed to pay in pounds on February 1, 20X4. Both corporations are on a calendar year accounting period. Assume that the spot.
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LO2 Exercise 9 On September 1, 2006, Warbler Corporation acquired an 80% interest in Reed Corporation for $700,000. Reed’s stockholders’ equity at January 1, 2006 consisted of $200,000 of Common Stock and $600,000 of Retained Earnings. The book values of its assets and liabilities were equal to their respective fair values on.
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LO1 Exercise 1 Paice Corporation owns 80% of the voting common stock of Accardi Corporation and 60% of the voting common stock of Badger Corporation. Accardi owns 20% of the voting common stock of Badger. There are no cost-book differentials to consider. The separate incomes of these affiliated companies for 2005 are:                            .
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LO2 Exercise 4 Parker Corporation owns an 80% interest in Sample Corporation. Throughout 2005, Sample had 10,000 shares of common stock outstanding and Parker had 100,000 shares of common stock outstanding. Sample’s only dilutive security consists of $50,000 face amount of 8% bonds payable. Each bond is convertible into 20 shares of.
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LO1 Exercise 2 Partel Corporation purchased 75% of Sandford Corporation on January 1, 2005, for $230,000. Balance sheets for the two companies on this date, prepared just prior to the purchase, are provided below.  Partel Book Values Sandford Book Values Sandford Fair Values Cash $ 330,000 $ 10,000 $ 10,000 Inventory 270,000 70,000 90,000 Buildings & equipment- net 500,000 120,000 190,000 Total assets $ 1,100,000 $ 200,000 $ 290,000 Common stock $ 300,000 95,000 Retained earnings 800,000 105,000 Total equities $ 1,100,000 $ 200,000 Required: Prepare one consolidated balance sheet using the proprietary (pro-rata) theory of.
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LO2 11. In a company with minority interest equity, how is the preferred stock call premium addressed? a. It is recorded as an increase in additional paid-in capital. b. It is recorded as a decrease in additional paid-in capital. c. It is recorded as an increase in retained earnings. d. It is recorded as a decrease in retained earnings. LO2 12. If.
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Multiple Choice Questions LO1 1.Pallet Corporation owns 80% of Adelt Corporation and Adelt owns 60% of Bajo Inc. Which of the following is correct? a.Bajo should not be consolidated because minority interests hold 52%. b.Bajo should be consolidated because the 60% of Bajo stock is held in the affiliate structure. c.Pallet has 8% indirect ownership.
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LO3 Exercise 8 On January 1, 2005, Panos Corporation acquired all of the outstanding voting common stock of Saley Corporation in an acquisition.  The total purchase price for the stock was $1,300,000. Saley’s net assets on this date were as follows: Saley’s Book Values Saley’s Fair Values Cash $ 20,000 $ 20,000 Inventories 210,000 240,000 Land 200,000 250,000 Building-net 600,000 900,000 Total assets $ 1,030,000 $ 1,410,000 Liabilities $ 230,000 $ 230,000 Common stock 400,000 Retained earnings 400,000 Total equities $ 1,030,000 Assume that for federal income tax.
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LO1 Exercise 4 Patane Corporation acquired 80% of the outstanding voting common stock of Sanlon Corporation on January 1, 2005, for $500,000. Sanlon Corporation’s stockholders’ equity at this date consisted of $250,000 in Capital Stock and $100,000 in Retained Earnings. The fair value of Sanlon’s assets was equal to the book value.
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LO2 Exercise 10 Padua Corporation owns 80% of Able Corporation, Able Corporation owns 60% of Baden Corporation, and Baden Corporation owns 10% of Padua Corporation. The separate incomes (excluding investment income), of Padua, Able, and Baden are $300,000, $100,000, and $80,000, respectively. Required: Calculate the consolidated net income for Padua Corporation and.
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LO1 Exercise 2 Samford Corporation’s stockholders’ equity on December 31, 2004 was as follows: 8% cumulative preferred stock, $100 par value,   callable at $109, with two years of dividends   in arrears $ 100,000 Common stock, $25 par value 700,000 Additional paid-in capital 250,000 Retained earnings 400,000 Total stockholders’ equity $ 1,450,000 On January 1, 2005, Park Corporation purchased a 70% interest in Samford’s common stock.
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LO3 Exercise 2 On October 15, 20X5, Ibis Corporation, a French company, ordered merchandise listed on the Internet for 20,000 Euros from Spoonbill Corporation, a US corporation, which immediately accepted the order.  The Euro rate was $1.20 US on October 15.   On November 15, 20X5 Spoonbill shipped the goods and billed Ibis.
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LO1 Exercise 4 At December 31, 2005 year-end, Lapwing Corporation’s investment in Openground Inc. was 200,000 consisting of 80% of Openground’s $250,000 stockholders’ equity on that date.  On April 1, 2006, Lapwing sold 20% interest (one-fourth of its holdings)  in Openground for $65,000.  During 2006, Openground had net income of $75,000 and.
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LO3 Exercise 9 Patch Corporation has a 50% undivided interest in Saric Corporation, a joint venture. Patch accounts for its interest in Saric by the equity method and also prepares consolidated financial statements for external reporting purposes. Patch follows specialized industry practices and uses proportionate consolidation for its interest in Saric. Separate.
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Multiple Choice Questions Use the following information for Questions 1 and 2. Parminter Corporation owns an 80% interest in the common stock of Sanchez Corporation and 20% of Sanchez’s preferred stock on December 31, 2005.  Sanchez had 2005 net income of $30,000.  Sanchez’s equity was as follows: 10% preferred stock $ 50,000 Common stock        .
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LO2 Exercise 8 Swift Corporation paid $40,000 cash for an 80% interest in the voting common stock of Weather Front Corporation on July 1, 2005, when Weather Front’s stockholders’ equity consisted of $30,000 of $10 par common stock and $15,000 retained earnings. The excess cost over the book value of the investment.
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LO3 Exercise 5 Pane Corporation owns 100% of Alder Corporation, 85% of Ball Corporation, 70% of Cake Corporation, 40% of Dash Corporation, and 10% of Eager Corporation. All of these corporations are domestic corporations. Pane's marginal income tax rate is 35%. During 2008, Pane Corporation received the following cash dividends: From Alder: $180,000 From Ball: $170,000 From.
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LO1 Exercise 4 Packer Corporation owns 100% of Abel Corporation, Abel Corporation owns 95% of Bacon Corporation and Bacon Corporation owns 80% of Cab Corporation. The separate incomes of Packer, Abel, Bacon, and Cab are $300,000, $100,000, $200,000, and $300,000, respectively. All of the investments were made at times when the investee’s.
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LO3 Exercise 10 On January 1, 2005, Parcel Corporation acquired all of the outstanding voting common stock of Salmon Corporation in an acquisition.  The total purchase price for the stock was $1,020,000. Salmons’s net assets on this date were as follows: Salmon’s Book Values Salmon’s Fair Values Cash $ 20,000 $ 20,000 Inventories 210,000 240,000 Land 200,000 320,000 Building-net 600,000 500,000 Total assets $ 1,030,000 $ 1,080,000 Liabilities $ 230,000 $ 210,000 Common stock 400,000 Retained earnings 400,000 Total equities $ 1,030,000 Assume that for federal income tax.
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LO2 Exercise 6 Partridge Corporation purchased an 80% interest in Sandy Corporation for $840,000 on January 1, 2005. Sandy's balance sheet book values and accompanying fair values on this date are shown below. Book Value Fair Value Entity Theory Push- Down Balance Sheet Parent Company Theory Push- Down Balance Sheet Cash $ 30,000 $ 30,000 Receivables 200,000 200,000 Inventory 300,000 360,000 Land 50,000 90,000 Plant assets-net 250,000 300,000 Total Assets $ 830,000 $980,000 Current liabilities $ 180,000 $180,000 Other liabilities 120,000 100,000 Common Stock 400,000 Retained Earnings 130,000 Total Liab. & Equity $ 830,000 Required Complete the push-down columns of Sandy Corporation’s restructured balance.
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Use the following information for Questions 11, 12, and 13. Pace Corporation owns 70% of Abaza Corporation and 60% of Babon Corporation. Abaza Corporation owns 20% of Babon Corporation. Pace’s investment in Abaza was consummated in one transaction at a purchase price $20,000 in excess of the book value. Pace’s purchase.
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LO2 Exercise 7 Party Corporation acquired an 80% interest in Sang Corporation on January 1, 2005 for $20,000. Balance sheet and fair value information on this date is summarized as follows: Party Book Value Sang Book Value Sang Fair Value Current assets $ 15,000 $ 9,000 $ 9,000 Land and Building-net 35,000 7,000 7,000 Equipment 8,000 4,000 6,000 Total assets $ 58,000 $ 20,000 $ 22,000 Liabilities $ 27,000 $ 10,000 10,000 Capital stock 18,000 4,000 Retained earnings 13,000 6,000 Total liab. & equity $ 58,000 $ 20,000 Required: 1. Prepare an entry on the books of Sang Corporation to record the push-down.
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LO2 Exercise 9 Padhy Corporation owns 80% of Abrams Corporation, Abrams Corporation owns 60% of Bacud Corporation, and Bacud Corporation owns 10% of Padhy Corporation. The separate incomes (excluding investment income), of Padhy, Abrams, and Bacud are $300,000, $100,000, and $80,000, respectively. Required: Calculate the consolidated net income for Padhy Corporation and.
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LO2 Exercise 8 Pascal Corporation paid $225,000 for a 70% interest in Sank Corporation on January 1, 2005. On that date, Sank’s balance sheet accounts, at book value and fair value, were as follows: Book Value Fair Value Assets Cash $ 25,000 $ 25,000 Accounts receivable-net 45,000 55,000 Inventories 40,000 60,000 Property, plant, and equipment-net 140,000 125,000 Total assets $ 250,000 $ 265,000 Equities Accounts payable $ 40,000 $ 40,000 Common stock 120,000 Retained earnings 90,000 Total liab. & equity $ 250,000 Required: Prepare a balance sheet for Sank.
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LO3 Exercise 10 At January 1, 2005, the stockholders’ equity of Raven Corporation and its 60%-owned subsidiary, Trunk Corporation, are as follows: Raven Trunk Common stock, $10 par value $ 700,000 $ 400,000 Retained earnings 800,000 50,000 Totals $ 1,500,000 $ 450,000 Trunk’s net income for 2005 was $40,000. Raven’s Investment in Trunk account balance on December 31, 2005 was equal to its underlying equity on December 31,.
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LO2 Exercise 7 Swallow Corporation paid $62,000 to acquire 100% of Gully Corporation’s outstanding voting common stock at book value on May 1, 2006.  The stockholders’ equity of Gully on January 1, 2006 consisted of $40,000 Capital Stock and $20,000 Retained Earnings. Gully’s total dividends for 2006 were $6,000, paid equally on.
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LO4 & LO5 Exercise 10 On January 1, 2005, Alford Corporation and Bancroft Inc. decided to set up a syndicate called Showtime to conduct.  The partners agreed to a 50%-50% split of Showtime’s profits, but Alford will absorb all losses. After the partners contributed $15,000 each on January 1, 2005, no journal.
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LO1 Exercise 5 On January 1, 2005 Paki Inc. bought 75% interest in Adam Corporation.  At the time of purchase, Adam owned 80% of Baird Company and 10% of Castle Corporation.  In all acquisitions the book value equals the fair value.  Separate earnings for the three affiliates for 2005 are as follows: Separate.
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LO3 Exercise 7 Pretax operating incomes of Panitz Corporation and its 80%-owned subsidiary, Salazar Corporation, for the year 2005, are shown below. Salazar pays total dividends of $65,000 for the year. There are no unamortized cost-book differentials relating to Panitz’s investment in Salazar. During the year, Panitz sold land to Hamilton at.
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LO2 Exercise 3 Pancino Corporation owns a 90% interest in Sakal Corporation. Throughout 2005, Sakal had 20,000 shares of common stock outstanding and Pancino has 50,000 shares of common stock outstanding. Sakal’s only dilutive security also consists of 10,000 stock options. It takes 4 options plus $20 to acquire one share of.
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LO1 Exercise 3 At the beginning of 2006, Flycatcher Corporation held a 60% interest in Lichen Corporation. The investment account balance was $2,100,000, consisting of 60% of Lichen’s $3,226,666 of net assets and $164,000 of goodwill. During 2006, Lichen earned $300,000 and paid dividends of $110,000 on November 1. On October 1, 2006,.
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LO3 Exercise 6 Pretax operating incomes of Pang Corporation and its 70%-owned subsidiary, Sala Corporation, for the year 2005, are shown below. Sala pays total dividends of $60,000 for the year. There are no unamortized cost-book differentials relating to Pang’s investment in Sala. During the year, Pang sold land to Sala for.
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LO1 Exercise 5 On April 1, 2006, Gouldian Corporation paid $120,000 for a 25% interest in Termite Mound Corporation. On July 1, 2006, Gouldian acquired an additional 45% (based on the January 1, 2006 number of Termite Mound shares outstanding) for $236,400. Termite Mound’s stockholders’ equity on January 1, 2006 consisted of.
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LO2 11. The SEC requires push-down accounting for SEC filings of subsidiaries when the subsidiary has no substantial publicly-held debt or preferred stock outstanding and a. the parent has substantial ownership (5% or greater). b. the parent has substantial ownership (20% or greater). c. the parent has substantial ownership (50% or greater). d. the parent has substantial ownership (97% or.
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LO2 Exercise 8 Separate earnings and investment percentages for the three affiliates for 2005 are as follows: Separate EarningsPercentage Interest in Acres              Percentage Interest in Bain               Palace Company$450,00080% Acres Inc200,00070% Bain Corporation160,00010% Required: Compute consolidated net income for Palace for 2005.   .
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LO1 Exercise 3 Pashley Corporation purchased 75% of Sargent Corporation on January 1, 2005, for $115,000. Balance sheets for the two companies on this date, prepared just prior to the purchase, are provided below.  Pashley Book Values Sargent Book Values Sargent Fair Values Cash $ 165,000 $ 5,000 $ 5,000 Inventory 135,000 35,000 45,000 Buildings & equipment- net 250,000 60,000 95,000 Total assets $ 550,000 $ 100,000 $ 145,000 Common stock $ 150,000 $ 47,500 Retained earnings 400,000 52,500 Total equities $ 550,000 $ 100,000 Required: Prepare a consolidated balance sheet using the entity theory of consolidation. .
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LO1 Exercise 1 Saito Corporation’s stockholders’ equity on December 31, 2004 was as follows: 10% cumulative preferred stock, $100 par value,   callable at $105, with one year dividends in arrears $ 10,000 Common stock, $1 par value 50,000 Additional paid-in capital 150,000 Retained earnings 160,000 Total stockholders’ equity $ 370,000 On January 1, 2005, Panata Corporation paid $300,000 for a 70% interest in Saito’s underlying.
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Multiple Choice Questions Use the following information in answering Questions 1 and 2. Pasfield Corporation acquired a 90% interest in Santini Corporation for $90,000 cash on January 1, 2005. The following information is available for Santini at that time. Book Value Fair Value Difference Current assets $ 40,000 $ 50,000 $ 10,000 Plant assets 60,000 75,000 15,000 Liabilities ( 50,000 ) ( 50,000 ) 0 Net assets $ 50,000 $ 75,000 LO1 1. Under the entity theory, a consolidated balance sheet prepared immediately after.
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LO2 Exercise 7 Paine Corporation owns 90% of Achan Corporation, Achan Corporation owns 85% of Badge Corporation, and Badge Corporation owns 5% of Achan Corporation. The separate incomes (excluding investment income), of Paine, Achan, and Badge are $400,000, $160,000, and $220,000, respectively. Required: Calculate the consolidated net income for Paine Corporation and.
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LO1 Exercise 2 Pacini Corporation owns an 80% interest in Abdoo Corporation, acquired on January 1, 2004 for $700,000 when Abdoo’s stockholders’ equity consisted of $600,000 of Capital Stock and $200,000 of Retained Earnings. Abdoo Corporation acquired a 60% interest in Bach Corporation on July 1, 2004 for $180,000 when Bach had Capital.
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LO3 Exercise 9 Paradise Corporation owns 100% of Aldred Corporation, 90% of Balme Corporation, 80% of Calder Corporation, 75% of Dale Corporation, 20% of East Corporation, and 8% of Faber Corporation. All of these corporations are domestic corporations. During 2005, Paradise Corporation reports net income of $1,500,000. This net income includes the.
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LO1 Exercise 3 Paik Corporation owns 80% of Acdol Corporation and 60% of Ben Corporation.  Acdol Corporation owns 10% of Ben Corporation. All subsidiary investments were acquired at book value equal to fair value. Separate incomes (excluding investment income) of the affiliated companies for 2005 are: Paik: $600,000 which includes $60,000 unrealized losses.
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LO2 Exercise 6 Paco Corporation owns 90% of Aber Corporation, Aber Corporation owns 85% of Back Corporation, and Back Corporation owns 5% of Aber Corporation. The separate incomes (excluding investment income), of Paco, Aber, and Back are $100,000, $40,000, and $55,000, respectively. Required: Calculate revised net incomes for Paco, Aber, and Back.
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LO1 Exercise 5 On January 1, 2005, Parton Corporation acquired an 80% interest in Sandra Corporation for $184,000. Sandra’s net assets on this date had a book value of $160,000 and a fair value of $210,000. The excess of fair value over book value at acquisition was attributable to $20,000 of understated.
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LO2 Exercise 1 On September 1, 20X5, Cormorant Company purchased merchandise from Osaka Company of Japan for 20,000,000 yen payable on October 1, 20X5.  The spot rate for yen was $0.0079 on September 1 and the spot rate was $0.0077 on October 1. Required: 1. Did the exchange rate strength or weaken from.
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